Microfinance portfolio contracts further to Rs 3.59 lakh cr
India's microfinance market experienced a contraction, with the gross loan portfolio declining to Rs 3.59 lakh crore by June 2025. Lenders are prioritizing responsible lending and addressing overleveraging, leading to a decrease in borrowers with multiple lender associations. While early-stage delinquencies improved, later-stage stress remains a concern, indicating a shift towards quality-focused lending.
Agencies Representative image Kolkata: The size of India's microfinance market contracted further to Rs 3.59 lakh crore at the end of June, down 5.8% quarter-on-quarter and 17% year-on-year as lenders remained circumspect over growing lending portfolio.
The active loan accounts fell to 13.2 crore from 15.93 crore, with the live customer base declining to 8 crore from 8.66 between June 2024 and June 2025. The data were compiled and shared by credit bureau Credit High Mark.
The sectoral gross loan portfolio started falling from the first quarter of FY25 after it reached a record high of Rs 4.43 lakh crore at the end of March 2024. It fell to Rs 4.32 lakh crore at the end of June 2024.
The moderation aligns with the Reserve Bank of India's push for responsible lending, alongside guardrails from self-regulatory organisations to curb overleveraging, it said. Over the last few quarters, the issue of overlending has also been addressed. Borrowers with four or more active lender associations fell sharply to 10% in June 2025, from 19.2% a year earlier.
Over the last 12 months, about 60% of all loans were extended to existing customers with proven repayment histories. Loans above Rs 1 lakh increased in portfolio share to 8.3% as of June 2025 from 4.6% a year back, with 80% of it going to borrowers with a vintage of more than 24 months.
The credit bureau said that the portfolio performance has shown green shoots with early- and mid-stage delinquency levels (PAR 31–90) improved from 3.1% in December 2024 and 2.7% in March 2025 to 2.4% in June 2025, signalling strengthening repayment discipline. However, stress in later-stage buckets (PAR 180+ including write-offs) continued to rise, reaching 12.4% in June 2025 from 5.2% in June 2024, underscoring ongoing challenges.
The performance highlighted a shift towards quality-focused lending, said CRIF High Mark chairman Sachin Seth.
"Lenders prioritised established borrowers, reduced overleveraging, and adjusted ticket sizes in line with risk considerations. The data also highlights early improvements in portfolio quality, with mid-stage delinquencies showing some improvement over the past two quarters,' he said.
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